Perhaps there has never been a boardroom fight in Canadian financial history like the one that is raging within Rogers Communications Inc.
Pitting son against mother and brother against sisters, he has brought to light an ugly, internal ugly that had been brewing behind closed doors since the family patriarch, Ted Rogers, died in 2008.
After a week of attacks and counterattacks, which followed like rapid fire one after another, Edward Rogers, Ted’s only son, appears to have the upper hand over his mother and sisters in the fight for control of the largest wireless company in the world. Canada.
What’s unclear is whether he can hold onto that power (both sides claimed Sunday that their list of board directors was in charge) and, more importantly, whether whoever finishes at the top can turn a ruined business around. and bring to life an action that has lagged far behind its rivals since Ted’s death.
“It’s like a family business at its worst,” said Kai Li, a finance professor at the University of British Columbia who teaches courses on mergers and acquisitions.
Li says the infighting is so bad it could threaten the planned $ 16 billion acquisition of Shaw Communications Inc., a linchpin to any successful restructuring plan. The deal is seen as necessary to improve Rogers’ wireless network in western Canada, expand its cable business, and give it financial clout to compete against its larger rival, BCE Inc.
As the family feud erupted in the public eye, Shaw’s stock plummeted for nine days in a row. They are now trading 12% below the takeover offer, a sign that investors are beginning to worry that the transaction will collapse or be delayed. “This is a huge crisis situation,” Li said.
The power struggle between Edward Rogers, members of his family, and company executives has raged for years. But things really started to explode when he devised a plan to remove CEO Joe Natale and several other top executives and promote CFO Tony Staffieri to the top job.
Edward’s sisters, Melinda Rogers-Hixon and Martha Rogers, and their mother, Loretta Rogers, Ted’s widow, teamed up with other directors to side with Natale and block change. They also took unprecedented steps to limit Edward’s authority, including his removal as president on October 21.
In an appropriate twist on such a savage affair, Staffieri accidentally revealed the coup plot to Natale by dialing the CEO’s pocket number while discussing it with someone else, according to a person with knowledge of the incident, which was first reported by the Globe. and mail. Staffieri left the company on September 29.
Behind Edward’s attempt to oust Natale is frustration with the company’s performance, including its wireless unit, which has 11.2 million subscribers.
Problems include slow growth in wireless network revenue; a loss of roaming revenue due to Covid-19 travel restrictions; and a media division that is barely profitable and carries the weight of a costly rights contract with the National Hockey League.
But Edward Rogers has also earned a reputation for meddling and undermining the company’s top executives, even before the latest chapter with Natale. The previous CEO, a charismatic British executive named Guy Laurence, lasted less than three years. The previous one, Nadir Mohamed, survived a little more than four.
Within the Rogers board of directors and the family, there is a growing belief that Edward is the reason for the revolving door of top management, according to a person familiar with the board’s deliberations.
Rogers directors said they have tried to stop Edward from “ongoing scheming behind the back of the leader in this company for the past seven years,” according to a letter sent by independent directors to the Rogers family’s adviser, John Tory, on Sept. 20. October (Tory is also the mayor of Toronto.)
“The president wants to run the company, he believes he does run the company, and no CEO or management team can operate effectively under these conditions,” the directors said in the letter.
Family arguments and the company’s structure, which concentrates power on members of the Rogers family, have become a drag on the wireless company’s stock, said Norman Levine, managing director of Portfolio Management Corp., a Toronto-based investment firm.
“One of the problems that Rogers has had all the time is very poor corporate governance,” Levine said on BNN Bloomberg Television. “Explain to the public now why Rogers is selling at a discount to the other telcos and has done so for quite some time.”
Edward Rogers’ entanglement with Natale, at a time when a major deal is taking place, appears to have crossed a red line for his mother, sisters, and most of the board. When they stopped their plan to fire the CEO, he responded by recruiting five new independent directors. They, in turn, stripped him of his title of president.
But the story doesn’t end there due to the peculiarity of Edward’s other role. He is also Chairman of the Rogers Control Trust, the private entity that controls about 97% of the voting shares in Rogers Communications, a stake worth C $ 6.7 billion ($ 5.4 billion).
That position gives him broad authority to vote the family’s shares in the public company. He’s trying to use that power to execute his plan to change five of the 14 board members. Combined with two other directors already known to support him, plus his own vote, Edward Rogers could once again exercise his power at Rogers Communications and possibly fire Natale.
His own mother denounced him publicly.
“Simply put, their actions demonstrate a disregard for good governance and create a great deal of risk for the company at an especially sensitive time,” Loretta Rogers, Melinda Rogers-Hixon and Martha Rogers said in a statement Friday.
Martha Rogers said Saturday they would spend “every last penny defending the company, the employees and Ted’s wishes” against her brother’s boardroom game.
Then on Saturday, investors witnessed the strange spectacle of conflicting statements about who, exactly, is on the board of a C $ 30 billion public company that owns some of Canada’s most important communication networks.
Edward Rogers claimed that he has already changed the board with a written shareholder resolution and that the new board held its first meeting on Sunday night. The company, its new president and Melinda Rogers-Hixon say it is legally impossible for him to fire and hire directors on a whim, so the alleged board meeting is pointless.
Still, Edward Rogers has a good chance of getting away with it, eventually.
The head of the Rogers Control Trust has the votes that elect the Rogers Communications board of directors, according to disclosures from the public company. Edward’s sisters and mother can’t remove him from that position unless they get seven out of 10 votes on the trust’s advisory committee, and at this point, it doesn’t seem like they can.
It is a complicated mechanism that was designed by Ted Rogers. I was hopeful that the trust would help us achieve a smooth transition to the next generation at Rogers Communications.
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